Lists of shares worth buying

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In the January 2018 edition of ‘Beste Belegger’, you were introduced to an interesting contribution named ‘De VFB Eindejaarsvraagjes’ (or VFB end-of-year questions). A number of analysts each introduces three shares worth buying. 

A brave task with the final score in December 2018; brave in particular considering that the economic and political landscape can change tremendously within 12 months.

Thought has been put into the shares worth buying, and exactly for that reason, lists like these have great value. Perhaps more on the fundamental than the technical side. Moreover, it concerns a plethora of different applied valuation models and growth prognoses, which makes the report even more intriguing. 

These examinations will save you a lot of time, and you will be able to limit yourself to a relatively small group of shares worth buying. The wheat and the chaff have been separated. 

The timing of purchase

The analysts expect a bright future for the shares discussed. It is up to you, as an investor, to determine when you step in. Do you have the means to buy freely? Would you prefer waiting for a small dip? And, indeed, not all recommended shares will actually perform the way that is expected in 2018… Perhaps a share performs poorly in 2018, but it might start going up in 2019. 

The choice of shares is in your hands, which brings us to the next step: how do you determine the moment of purchase?

You can examine the shares separately on a technical lattice, or you can analyse them collectively. In this contribution, I will focus on the collective method, because that saves you a lot of time. In addition, it is a simple and logical method – no complicated formulas. 

The Yield–Strength Analysis

The first column of the table above shows the recommended European shares.

The columns next to it indicate the yields and strengths on the basis of stock data of 24 January 2018. What do these columns mean, and how do you interpret their value? The following terms will be explained in English.

%HH-3mnd: measures the difference between the closing price and the highest price of the past 3 months
%HH-1jr: measures the difference between the closing price and the highest price of the past year
Interpretation:  The smaller the value, the closer the share quotes to its top. 

%LL-3mnd: measures the difference between the closing price and the lowest price of the past 3 months
%LL-1jr: measures the difference between the closing price and the lowest price of the past year
Interpretation: The smaller the value, the closer the share quotes to its bottom. 

IDX:  Represents the stock market index; in this example, EuroStoxx600 is used

IDX-Sterkte-KT: measures the relative strength of the share relative to the stock market index on the short term
IDX-Sterkte-MT: measures the RS of the share relative to the stock market index on medium term
Interpretation: If it lies around 100, the share moves as much as the stock market index. 

KRS-Sterkte KT: measures the strength of market movement on the short term
KRS-Sterkte MT: measures the strength of market movement on the medium term
Interpretation: the market strength is neutral around 50.  

Hoe gebruikt u de tabel
  • Wat is uw profiel? Bent u een actieve of niet-actieve belegger > KT of MT
  • Hebt u het aandeel reeds in portefeuille of betreft het een nieuwe aankoop? 
Two examples
  • You have NN Groep in your portfolio
    The table yields the following data: %HH = -1.43% (KT and MT)
    %LL = 11.44% and 35.49%
    IDX-Sterkte: 104 and 106
    KRS-Sterkte: 64 and 69Analysis
    Technically interesting, strong share
    The share performs 4 to 6% better than the market index => You keep the share in your portfolio and raise your stoploss frequently. 
  • You are a long-term investor, and you are interested in the share SPIE
    %HH = -10.11% and -22.41%
    %LL = 0.76% and 1.43%
    IDX-Sterkte: 93  and 89
    KRS_Sterkte: 39 and 40Analysis:
    The share quotes near a bottom, performs less well than the stock market index, while finacial markets are on the rise. The share is not wanted by investors at this time. => Bottom formation. The share can fall through the bottom, which means that an investment in this share, at this moment, is only cut out for active investors. They can get out in time with a limited loss when the share breaks through its support. 

From the technical analysis in this article, we will take away some elements that will help us become successful investing in shares:

  • Fundamental recommended shares are interesting to follow
  • Your investor’s profile is important when choosing shares
  • A collective analysis saves much time
  • Check and compare yields of shares interdependently
  • Check the strength of shares against an important stock market index

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